Mortgage loan Insurance
What is Mortgage Insurance and Why do we have to have it?
It used to be that if you wanted to get a mortgage in Canada you would only be approved if you could come up with 20% down. For a lot of people that was a challenge and made it very difficult for the average individual to get a mortgage. So the Canadian Government stepped in within a solution. That solution was mortgage insurance. Canadians are now required to pay mortgage insurance on any home purchase where they are unable to come up with 20% as a down payment. This insurance protects the lender from client default. That means if the customer walks away from their home or does not make payments the insurance company will cover the cost of the last 20% that the lender would have required for the down payment.
However, the insurance fee is not paid by the bank it is paid by the client. The premium can be paid in cash but many clients opt to have the mortgage insurance tacked onto their mortgage. For example a $200 000 mortgage would become a $206 000 mortgage if the insurance premium was 3%. Insurance premiums generally range from 0% to 6% depending on the amount of money down and the risk the insurance company feels they are taking on. Although, it is an added fee for the client in many cases it helps the client a great deal. Most Canadians do not have 20% to put down, the insurance premium allows Canadians to buy homes with a little as 0% down or 5% down. For more information about mortgage insurance feel free to contact us.
It used to be that if you wanted to get a mortgage in Canada you would only be approved if you could come up with 20% down. For a lot of people that was a challenge and made it very difficult for the average individual to get a mortgage. So the Canadian Government stepped in within a solution. That solution was mortgage insurance. Canadians are now required to pay mortgage insurance on any home purchase where they are unable to come up with 20% as a down payment. This insurance protects the lender from client default. That means if the customer walks away from their home or does not make payments the insurance company will cover the cost of the last 20% that the lender would have required for the down payment.
However, the insurance fee is not paid by the bank it is paid by the client. The premium can be paid in cash but many clients opt to have the mortgage insurance tacked onto their mortgage. For example a $200 000 mortgage would become a $206 000 mortgage if the insurance premium was 3%. Insurance premiums generally range from 0% to 6% depending on the amount of money down and the risk the insurance company feels they are taking on. Although, it is an added fee for the client in many cases it helps the client a great deal. Most Canadians do not have 20% to put down, the insurance premium allows Canadians to buy homes with a little as 0% down or 5% down. For more information about mortgage insurance feel free to contact us.